When is a tax cut not a tax cut? When it doesn’t cut taxes

Minnesota’s media is doing its dutiful best to sell the various tax packages swirling around the Capitol as “tax cuts.” WCCO, for example, reports: “Minnesota Senate passes tax bill featuring $4B in cuts.” Which taxes are being cut?

Income tax? No. In fact, the House budget wants to increase income taxes on high earning Minnesotans, giving us, according to Timothy Vermeer of the Tax Foundation, “the 5th highest individual income tax rate in the country, behind only California, Hawaii, New York, and New Jersey.”

Corporate tax? Again, no. And again, both the House and Senate budgets want to increase Minnesota’s corporate taxes by enacting “worldwide combined reporting,” which would, as Vermeer explains, “dramatically increase the complexity and compliance costs for corporations engaging in business in Minnesota.” “Estimates for what combined reporting will generate have often failed to materialize,” he notes:

When Minnesota adopted combined reporting, the bill analysis gave an estimate of $23 to $103 million in additional revenue—an extremely broad range indicative of great uncertainty. Subsequent analysis indicates that the shift to combined reporting may not have increased revenue at all.

This is why “No other state or country mandates all-industry worldwide combined reporting.”

Well, how about sales taxes? Thrice no. And yet again, there are a number of proposals afoot to increase local sales taxes.

So what taxes are being cut? Well, the tax on Social Security income is being cut a bit. But that is it. So what “tax cuts” is WCCO referring to? It reports:

The bill includes one-time rebate checks in the amount of $558 for couples making up to $150,000, and $279 for single filers making up to $75,000. Taxpayers with children would receive an additional $56 per child (up to three).

Other highlights include a $620-per-child tax credit for families making up to $80,000,…and more than $900 million to aid with child care costs.

So, when you hear about all these tax cuts, it doesn’t actually mean that taxes are being cut — they aren’t — it means that some people will get a bunch of cash handed to them.

As I told the Duluth News Tribune:

“What these various budgets do is hand a bunch of cash to people and call that a ‘tax cut’,” Phelan said in a statement to the News Tribune Opinion page. “Many of these handouts are targeted at people who, in many cases, haven’t got a tax liability in the first place. The bottom 20% of Minnesota households by income actually take more from the state government in income tax than they pay in. So their taxes aren’t being ‘cut’ in any meaningful way. One thing you want from tax cuts is to increase the reward (for) working and investing so that more working and investing goes on. That means cutting the rates, not leaving those rates in place (or higher) and doling out millions in handouts. That is far more likely to decrease the amount of working and investing that goes on.”

I’m reminded of that scene in “The Jerk” where Navin’s father tries to teach him how to identify Shinola. Maybe Minnesota’s media should give that film a watch this weekend.